Republicans plan legal assault on climate disclosure rules for public companies

The SEC’s proposed new rules, which would require public corporations to disclose climate-related information, have been criticized by industry groups

Republican officials and corporate lobby groups are teeing up a multi-pronged legal assault on the Biden administration’s effort to help investors hold public corporations accountable for their carbon emissions and other climate change risks.

The US Securities and Exchange Commission (SEC) proposed new climate disclosure rules in March that would require public companies to report the climate-related impact and risks to their businesses.

The regulator has since received more than 14,500 comments. Submissions from 24 Republican state attorneys general and some of the country’s most powerful industry associations suggest that these groups are preparing a series of legal challenges after the regulation is finalized, which could happen as soon as next month.

“I would expect a litigation challenge to be brought immediately once the final rule is released,” Jill E Fisch, a business law professor at the University of Pennsylvania, told the Guardian. “They probably have their complaints already drafted, and they’re ready to file.”

Some opponents claim that requiring companies to publish climate-related information infringes on their right to free speech. Others (often the same ones) say that the rule exceeds the SEC’s legal authority.

Both critiques feature prominently in comments from the Republican attorneys general and the US Chamber of Commerce, which spent more than $35m lobbying the federal government in the first half of 2022, according to OpenSecrets. The Republican letter warns that if the new disclosure requirements are finalized, “capitalism will fall by the wayside.”

The SEC proposal does not establish environmental policy or require that companies take any climate-related actions other than making more information publicly available.

The free speech and legal authority objections have been met with profound skepticism from legal experts and former SEC officials.

In a letter to the commission, John Coates, a Harvard Law School professor and former SEC general counsel, said that instead of challenging the climate disclosure rule on its merits, “critics have resorted to mischaracterizing the proposal, and inventing their own, fictional rule”.

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In another letter, a bipartisan group of former SEC officials, legal scholars, securities law experts and corporate lawyers noted that “the SEC has mandated environmental disclosure at least as far back as the Nixon administration.” Even though not all of the letter’s authors support the substance of the rulemaking, they agreed without exception “that there is no legal basis to doubt the commission’s authority to mandate public-company disclosures related to climate.”

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